This morning the UK has received some economic news which fits with the recent sunny and warmer weather.
UK gross domestic product (GDP) is estimated to have increased by 0.6% in Quarter 1 (Jan to Mar) 2024, following declines of 0.3% in Quarter 4 (Oct to Dec) and 0.1% in Quarter 3 (July to Sept) 2023.
That is an outright good number and even our national broadcaster is reporting that.
The 0.6% rise in GDP means that the economy grew at the fastest rate for two years, according to the ONS.
It is the best growth since the first three months of 2022 when Russia invaded Ukraine, sparking an energy crisis, soaring food prices and general inflationary chaos.
We have wiped out the recession although to my mind if you recall the wild swings in retail sales ( a collapse in December and a surge in January) I think some of the fall then rise was a statistical anomaly. The adjustments have not kept up with the changes in the times.But returning to the figures our growth was such we have something we have not had for a while.
Real GDP per head is estimated to have increased by 0.4% in Quarter 1 2024, following seven consecutive quarters without positive growth.
We can drill down into the numbers and see that services were the biggest contributor but not the fastest growth area.
In output terms, services grew by 0.7% on the quarter with widespread growth across the sector; elsewhere the production sector grew by 0.8% while the construction sector fell by 0.9%.
Services
In fact we saw growth in each of the individual months and it was pretty broad.
Services increased in all three months of the quarter: January (0.4%), February (0.3%) and March (0.5%), as explained in our monthly GDP release…….There was widespread growth in the services sector, with 11 out of 14 subsectors increasing in Quarter 1 2024,
The leader of the pack is below.
The largest contributor to the growth in service output was a 3.7% increase in the transport and storage subsector. This was largely driven by growth of 6.4% in land transport services via pipelines (excluding rail transport). This industry saw its highest quarterly growth rate since Quarter 3 2020.
Actually whilst there was growth in that sector some of it was via a reshuffling of the statistical cards.
there was strong growth in February 2024 where Monthly Business Survey (MBS) data showed strength in the land transport services industry. A reclassification of a company into this industry, previously allocated in the wholesale trade excluding motor vehicles and motorcycles industry, also contributed to the strong growth.
Regular readers may recall the way that the construction numbers were distorted by something similar back in the day. It is one of the reasons (large revisions are another) why I lack confidence in them. As to the next area I think most would prefer it to be science rather than legal although of course the concept of science has been devalued by abuse of it.
Professional, scientific and technical activities increased 1.3% in the latest quarter and was the second-largest positive contributor. The growth in this subsector was driven mostly by legal activities, and scientific research and development.
I mentioned the swings in the retail sector earlier which were worse on a monthly basis at the turn of the year.
Overall, consumer-facing services grew by 0.6% in Quarter 1 2024, following a fall of 0.4% in Quarter 4 2023, and this was largely driven by Retail trade, except of motor vehicles and motorcycles.
Not every area grew and there was an interesting quirk which I have highlighted as is this another consequence of working from home?
Elsewhere there were falls in accommodation and food service activities (0.2%), and activities of households as employers; undifferentiated goods and services activities of households for own use (3.4%).
Production
Growth here was negative in January followed by a strong rally.
This reflects a fall of 0.5% in January 2024 followed by growths of 1.0% and 0.2% in February and March, respectively.
It was particularly welcome to see a recovery in manufacturing.
Manufacturing output is estimated to have increased by 1.4% in Quarter 1 2024 following a fall of 1.0% in Quarter 4 2023. The largest positive contributor was a 5.7% increase in the manufacture of transport equipment, which has grown for six consecutive quarters.
The breakdown has an interesting swing as I winder whether the decline in the textiles sector is due to the high inflation we saw in the clothing and footwear numbers?
Manufacture of basic metals and metal products grew 3.1% and manufacture of food products, beverages and tobacco showed growth of 1.5%. However, this was partially offset by a fall of 3.6% in the manufacture of textiles, wearing apparel and leather, which fell for the sixth consecutive quarter.
At the end of the report there are a couple of numbers which deserve more highlighting. With the problems in the water sector and Thames Water in particular the fall should be looked at more. Also in the midst of an energy crisis the fall in mining ( think oil and gas) reflects the disastrous policies our political class has imposed on us.
However, the growth in this sector and manufacturing was partially offset by a fall of 2.4% in water supply; sewerage, waste management and remediation activities, and a fall of 2.2% in mining and quarrying across the quarter.
As it happens their emphasis on renewables had a simply awful night especially for those who have been busy claiming that the wind always blows in the UK.
A proud moment for British ‘Wind Power’ As after 30 years of being papmpered and cossetted and subsidised big time, it can’t even manage to make 1% of our electricity tonight. Not 1/500th of our total energy needs
An absolute disgrace! ( @latimeralder)
Construction
As I stated earlier these numbers are rather unreliable.
Construction output is shown to have fallen by 0.9% in Quarter 1 2024 following a decline of 0.9% in the previous quarter. The level of construction output in Quarter 1 2024 was 0.7% lower than the same quarter a year ago.
Monthly Numbers
Each month showed economic growth and after the upwards revision to February it is pretty consistent for the monthly series.
GDP is estimated to have increased by 0.4% in March, following growth of 0.2% in February (revised up from 0.1% growth), and an unrevised increase of 0.3% in January 2024.
Bank of England
When I said that the numbers were welcome the Bank of England forecasting department may not be quite so keen after telling is this only yesterday.
Following modest weakness last year, UK GDP is expected to have risen by 0.4% in 2024 Q1
Even worse news is that they have used it for another of their theoretical brain farts.
Despite picking up during the forecast period, demand growth is expected to remain weaker than potential supply growth throughout most of that period. A margin of economic slack is projected to emerge during 2024 and 2025 and to remain thereafter,
Comment
It is nice to be able to review and analyse some much better economic numbers from the UK. It is hard not to have a wry smile at those who have been tweeting Brexit Disaster this week just in time for our quarterly economic growth to be double the Euro area’s. Buy whilst the number itself is good and hopefully sets the tone for 2024 the annual number shows that 2023 was a troubled one.
Compared with the same quarter a year ago, GDP is estimated to have increased by 0.2% in Quarter 1 2024.
If we move from quarterly to monthly picture improves.
GDP is estimated to have grown by 0.7% in March 2024 compared with the same month last year
We have improved from shrinking ( the last annual number for Q4 was -0.2%) so the direction of travel is good and looks set to pick-up. But it is also true that 0.2% is not very much and within the margin of error.
Also another hopeful sign is that the GDP inflation measure is declining.
The implied price of GDP rose by 0.6% in Quarter 1 2024, where the increase is primarily driven by higher prices in household consumption and gross capital formation. Compared with the same quarter a year ago, the GDP implied deflator further eased to 4.0%